New Zealand's unemployment rate of 7.3% overstates the weakness of the country's labour market, which has been tapering off through the latter half of this year, the Reserve Bank says.
The bank's latest forecast is more downbeat about the level of unemployment over the next two years, but is not convinced joblessness is at a 13-year high, as shown in Statistics New Zealand's household labour force survey – the official barometer.
The HLFS figures were in contrast to those in the Quarterly Employment Survey, falling numbers of unemployment beneficiaries, rising wage inflation and reports that employers are still finding it hard to attract staff.
"Looking at a broad range of measures, momentum in the labour market has weakened somewhat over the end of 2012," the bank says in commentary included in today's three-monthly Monetary Policy Statement. "We believe this deterioration is less severe than the HLFS would suggest."
The central bank expects unemployment of 7.1% in the March 2013 year, falling to 5.9% in 2014 and 4.9% in 2015, according to forecasts in the MPS. That is more pessimistic than the 6.4%, 5.3% and 4.9% forecasts in September.
A rising unemployment rate has surprised economists in the past three quarters, with the spike in September attracting scepticism while also pointing to a lull in what seemed a more strongly recovering economy.
Jobs growth in recent years has largely been underpinned by increasing numbers of part-time staff at the expense of full-timers, though the Canterbury rebuild is seen as a likely candidate to mop up spare capacity in the labour market.
"The continued high unemployment rate of the past three years highlights the risk that significant spare capacity remains in the wider economy," the bank says.
"Even if the unemployment rate dropped back below 7% in the December quarter, the HLFS would still suggest much more economic slack than other capacity indicators."